In a policy memo released today, How Not to Fund an Infrastructure Bank, Economic Policy Institute Tax and Budget Director Thomas Hungerford examines two bills which would create an infrastructure bank financed by bonds purchased by multinational corporations with earnings returned to the United States tax free.
Hungerford finds that the benefits of these infrastructure bank proposals would not outweigh their costs—the bills’ $50 billion funding target would cost the government between $70 to 100 billion in lost revenue from corporate taxes.
“With millions of people out of work and our nation’s roads and bridges crumbling, an infrastructure bank makes perfect sense,” said Hungerford, “but these bills are not a smart deal for the American people. The federal government would get some money now, but would lose more over the long term. Meanwhile, multinational corporations get a nice tax break. We would be better off simply financing a bank through direct appropriation.”
Hungerford’s analysis also shows that the bids made by multinational corporations to participate may be less aggressive than the bills’ sponsors estimate, and the initial funding for the infrastructure bank could be well below the $50 billion target.
Moreover, repatriation holidays set a bad precedent, leading firms to hold more earnings offshore and further postpone repatriation. In fact, multinational corporations have increased their accumulations of foreign earnings after the 2004 repatriation holiday in anticipation of another, which was proposed in 2009 but not enacted.